To buy overseas products:
- For high value items, research your country’s laws regarding imports from abroad, including any taxes or fees that you will be required to pay.
- Investigate which countries provide the best deals on the products you desire.
- If you are using a credit card to pay, factor in the cost of a foreign transaction fee and currency conversion markups.
- Create an account with OFX to save money on a bank-to-bank transfer. Transfer your payment online to avoid fees and high margins that are charged by credit cards and banks.
Buying goods from overseas is easier than ever, thanks to the internet, and it could be a great strategy if you are trying to save money. You could shop for your favourite designer brands from the comfort of home without having to travel anywhere. And when you factor in currency conversion rates, you might even be able to stretch your money further and buy more. This is especially helpful when you are hoping to invest in luxury items or one-of-a-kind antiques and collectibles.
If you are planning on purchasing items to resell in your online shop, sourcing your inventory from abroad could also give you the chance to take advantage of savings that you can’t find domestically. In turn, this might help to increase your profit margins as you continue making competitive sales.
But before you shop online for a luxury product or for inventory for your business, there are a few strategies that you should employ when buying overseas products.
Know Your Country’s Laws Regarding Imported Goods
When importing luxury items from abroad, you should be aware of your nation’s customs laws and the taxes that you may be required to pay on the items that you bring home. Beyond that, it is also important to be aware of any laws regarding restricted items, or those that you are not allowed to import into your country at all.
- If you are living in Australia and the products that you are importing are worth more than $1,000 AUD, it is likely that you will be required to sign an import declaration. You may also be required to pay duty and GST.
In Australia, weapons that include daggers and guns might be restricted or prohibited, or you might need to prove that you have the appropriate permits to purchase those items. Also, wood-based products might need to be treated or quarantined in order to reduce the risk of introducing diseases and pests, and you will have to pay for any costs associated with those treatments.
- If you are living in the United States, it is highly recommended that you contact your state treasury office and your local treasury office in order to determine if you will be required to pay any state or local taxes on the products that you are planning on importing. Just keep in mind that every state will have its own tax laws that you need to research, and getting help from a local port of entry will assist you in determining which duties and taxes, as well as fees, you will need to cover. Tobacco and alcohol products are considered restricted, and you might have to pay a Federal Excise Tax when importing those items.
- If you are living in the United Kingdom, buying from other countries in the European Union will be easier, at least until Brexit is complete. For example, as long as the U.K. is still a part of the E.U., if you are investing in products from outside of the E.U., you might be required to pay Customs and Excise duties, as well as VAT.
Items that are brought into the United Kingdom will go through customs in order to ensure that they are not restricted or banned. Some of the products that are not allowed include, but are not limited to, offensive weapons, self-defence sprays, endangered plants and animals, and any food or plant products that are not free of diseases and pests.1
For much more detailed information on this topic, check out our Guide to Importing Luxury Goods Purchased Abroad.
Shop from Countries with the Lowest Prices
Knowing where to shop for goods from overseas will also give you the chance to save money whenever you are making investments into luxury items or your online storefront.
A lot of e-commerce business owners choose to purchase their inventory in bulk from online suppliers. For example, shopping from product distributors in Asian nations, such as China, might help you save the most money when you are sourcing your inventory for your online shop. This is especially true if you are hoping to buy wholesale. But when it comes to shopping for luxury items, China might not be the most affordable choice after all.
In terms of luxury goods, Italy is at the top of the list when it comes to the number of luxury companies it has, but France maintains the greatest share of luxury sales. And the countries with the lowest prices on luxury items include Italy, France, and the United Kingdom.2 Even customers from Asia are shopping for their luxury goods in Europe because they can save money by doing so. This is because, in China, luxury items will cost roughly 21% more than the global average. On the other hand, those same luxury items are roughly 22% less than the global average when they are sold in Italy and France. This is a result of the duties and taxes that are applied by the Chinese government, as well as exchange rates and other costs, such as distribution costs, that drive the price of goods up.3
Consumers who are hoping to purchase designer brands can save quite a bit of money when they buy those items in Europe. Louis Vuitton products, for example, could be upwards of 50% more in China, and Armani goods could be as much as 70% more in China versus in France. Balenciaga items are roughly 25% more costly when purchased from China.3
Keep in mind, however, that currency exchange rates are always changing, and they can vary from one day to the next. Ultimately, to be sure that you are getting the best deal, you should consider using a currency converter prior to finalising a purchase. With the right exchange rate in place, you can spend even less, whether you are shopping from Europe, Asia, or anywhere else in the world.
Take Foreign Transaction Fees into Consideration
Whether you are shopping abroad in person or over the internet, you might incur a foreign transaction fee if you are working with an international merchant. This fee is charged by the majority of credit card companies and banks in order to cover their own costs for converting your local currency into the appropriate international currency when you make a purchase.
To shop smart and avoid having to pay a foreign currency exchange fee, you can see if you qualify for a credit card that does not charge this fee at all. Just keep in mind that these cards can be difficult to find and even harder to qualify for. And they also often come with fine print that includes having to pay other fees or getting hit with other restrictions in exchange for the ability to avoid foreign transaction fees.
Because the average foreign transaction fee that is associated with credit cards is 3%, you may be able to save a lot of money by finding alternative ways to pay for your goods from abroad. This is especially helpful when you are purchasing expensive luxury products, as well as when you are buying items in bulk for resale in your own online shop.
Keep in mind that the exchange rate used for a credit card purchase abroad is often at the discretion of the issuing bank. If a bank uses its published daily exchange rate when converting your funds, you could pay a margin of up to 5% above the live rate.
Rather than relying upon a credit card to make a payment, you can transfer your money at a better exchange rate by using OFX. In doing so, you may be able to avoid not only credit card fees, but also some bank fees as well.
Submit Your Payments via an Online Transfer Service
A better way to pay for your luxury goods, as well as your e-commerce inventory, is by using an online transfer service like OFX to submit your payments. You can keep more of your money when you transfer it directly to the seller via a bank-to-bank transfer (just don’t use your bank to make the transfer, if you want to save money.)
Setting up a transfer through OFX is easy, because you can do it all online. If you run into any trouble, our customer service team is available 24/7 to answer your questions.
When you use OFX, you may be able to get your goods sooner because most transfers to major markets typically take less than 1-2 business days. For large purchases of expensive luxury items or bulk items, you can set up recurring transfers on a schedule, provided that the seller will allow you to pay in instalments. Or you can use a Limit Order to set your preferred exchange rate and be notified once it is triggered, so you can shop while enjoying the benefit of an exchange rate that helps you save even more money. And if you are not ready to pay just yet but you want to lock in a great exchange rate, you can set up a Forward Contract for up to 12 months.
With the right payment strategy, you can make a luxury purchase without reservation. So go ahead and purchase that antique car from abroad that you have been eyeing. Once you submit your payment with OFX, you might have money left over to give it a brand new paint job once it arrives home.
Shop wise and save
In the end, it is important to do your research before purchasing items from another country, whether you are investing in designer goods or you are hoping to build up your online shop. Understanding what taxes you might owe on imports, as well as where you can find the best deals, will help you make the wisest buying choices. But to ensure you save money on fees and margins that are associated with paying overseas sellers, simply using a service like OFX could be just what you need to stretch your budget, so you can buy even more.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.